Washington Congress’ official Medicare advisers have joined the growing chorus of policy experts who say the program may never again be in as favorable a position to overhaul the formula that helps determine physician pay as it is now.

The annual March report to Congress from the Medicare Payment Advisory Commission renewed a proposed policy, first outlined in October 2011, to repeal the Medicare sustainable growth rate and replace it with a decade of set annual payment updates for physicians. In testimony to the House Ways and Means health subcommittee on March 15, the day the newest report was issued, MedPAC Chair Glenn Hackbarth outlined what is at stake for lawmakers on the Medicare payment issue if they go another year without taking the commission’s advice.

“The need to repeal the SGR is urgent,” Hackbarth said. “Deferring repeal of the SGR will not leave the Congress with a better set of choices, as the array of new payment models is unlikely to change, and SGR fatigue is increasing.”

In addition, he noted, the Congressional Budget Office recently revised its estimate downward — from $244 billion to $138 billion — for how much it would cost to repeal the SGR and stop a decade’s worth of scheduled cuts to Medicare physician pay rates. “CBO’s most recent budget projections have substantially lowered the budget score for SGR repeal and may present an opportunity for the Congress to act before the score changes again.”

That window is not expected to remain open for long, Hackbarth said. The size of the cuts mandated by the pay formula — and thus the amount of money needed to override them — depend on the relationship between the volume of services provided by doctors and the growth of the nation’s economy. These figures have proven to be very volatile in recent decades, he said, meaning the relatively low-cost repeal price tag might balloon again before long.

Rep. Kevin Brady (R, Texas), who chairs the Ways and Means health panel, made the same point during his opening statement for the hearing. “This year — right now — we have a golden opportunity to eliminate the long-problematic SGR once and for all and reform how Medicare pays physicians.”

Next doctor pay cut set at 24.4%

If Congress doesn’t act before the end of 2013 on a permanent SGR repeal or another short-term payment patch, physicians can expect their pay rates to decrease by nearly a quarter starting on Jan. 1, 2014.

The Centers for Medicare & Medicaid Services wrote to MedPAC on March 5 to inform the commission that the projected 2014 reduction under the SGR is 24.4%. That projected figure could change later in 2013, when CMS issues proposed and final versions of the physician fee schedule.

The American Medical Association said Congress cannot allow such a reduction to take effect, especially after lawmakers failed to reach an agreement on alternative federal deficit reductions to avert the automatic spending reductions through the process known as sequestration. The sequester, which operates outside the SGR, will reduce Medicare physician pay by 2% starting April 1.

“A looming 24.4% cut, on the heels of a 2% cut in Medicare payments, adds insult to injury for physician practices across this country,” said AMA President Jeremy A. Lazarus, MD. “Physicians are already facing an enormous gap between what Medicare pays and the actual cost of caring for seniors. A 2% cut from sequestration makes this even worse, and a cut of 24.4% is simply unfathomable.”

MedPAC plan would reduce some rates

Lawmakers are not required to follow MedPAC’s advice and often go their own way when crafting Medicare payment policy.

But the current fiscal situation in the U.S. makes it imperative that Congress closely consider several of the recommendations in the March report, said John Rother. He’s president and CEO of the National Coalition on Health Care, a Washington group whose members include medical societies, consumer organizations, employers and unions.

“With the sequester’s $128 billion in meat-ax provider cuts in place [for the first year] and Congress debating whether to shift billions more onto beneficiaries and states, there is no reason that ‘smart savings’ ideas like that of MedPAC should be left on the shelf for another year,” Rother said.

He singled out the commission’s recommendations on repealing the SGR, overhauling the postacute care system to curb hospital readmissions and paying the same rates for primary care provided in hospital outpatient departments as those paid to physician offices.

The MedPAC recommendations, however, have run into resistance from health professionals who would see lower rates as a result of efforts to generate savings for other areas of the program. Establishing payment parity between doctors’ offices and hospital outpatient departments, for instance, has been opposed strongly by hospital associations, which insist the departments face significantly higher costs in caring for patients.

In addition, the SGR repeal envisioned by MedPAC would avoid the deep reductions scheduled under the payment formula, but it would not mean that all doctors would escape payment cuts.

The pay of primary care physicians would be frozen for a decade while Congress crafted a replacement for the current payment system. Nonprimary care physicians would see annual rate reductions of 5.9% in each of the first three years, followed by a pay freeze for the remainder of the decade. The AMA and organizations representing specialty physicians support SGR repeal but strongly oppose a two-tiered approach that would mean pay cuts for many doctors.

The American Academy of Neurology is among the organizations that have warned against preventing Medicare pay reductions for some physicians while allowing cuts to go through for others. It said patients will find it harder to see needed specialists if the cuts mean fewer doctors accept Medicare patients.

Although MedPAC “finds it crucial to protect beneficiaries’ access to primary care services, access to neurologists is getting worse,” the academy said in a statement on the March report. “In 2012, patients had to wait 34 days on average to see a neurologist, which is a 28% increase in an appointment wait time from 2010.”